On the first business day after bakers went on strike against Hostess Brands, the Irving-based company said Monday it will permanently close three striking bakeries, putting 627 employees out of work.

Late Friday, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike against Irving-based Hostess to protest cuts and give-backs in the company’s last, best, final contract offer. The contract, which was rejected by 92 percent of the union members who voted, called, in part, for 8 percent pay cuts, a company hiatus from contributions to a multi-employer pension plan and changes in work rules.

As of Monday, bakers had set up picket lines at about 23 of the 36 bakeries and production plants operated by the bankrupt snack maker. Hostess said the strike “has prevented the facilities from producing and delivering products.”

“Our customers will not be affected because we will continue to serve them from other Hostess Brands bakeries, but sadly this action will result in the permanent closure of three facilities and the loss of 627 jobs,” said Gregory Rayburn, Hostess Brands’ chief executive.

“We deeply regret this decision, but we have repeatedly explained that we will close facilities that are no longer able to produce and deliver products because of a work stoppage — and that we will close the entire company if widespread strikes cripple our business.”

The bakeries to be closed immediately are in Seattle, St. Louis and Cincinnati. The Seattle facility employs 110 people and produces Hostess cake products. The St. Louis facility employs 365 people and produces Hostess cakes and Nature’s Pride and Wonder breads.

Or, the Obama administration will decree that Twinkies, Cupcakes and Ho Ho's are unhealthy food items and an executive order will be issued that prevents those products from ever being manufactured again.

In ordinary times that would be tinfoil hat thinking. These days, not so much.

No, you still need a tinfoil hat to believe that. Sorry.

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"I love signature blocks on the Internet. I get to put whatever the hell I want in quotes, pick a pretend author, and bang, it's like he really said it." George Washington

What is this silly "it's all the Unions' fault" business about? Sure, they're probably partly to blame, but you guys just leap right to that when, frankly, neither you nor I have 1/1000th of the knowledge to truly understand what happened here. "The unions shut it down" is pretty simplistic thinking. What management did or didn't do in the past to make the company competitive, what the debt load is, what the equity owners were and weren't willing to do -- none of that matters in your simplistic view. It's just crazy.

So, for the sake of it, I decided to spent 10 seconds looking up its history, at least since the 2004 bankruptcy. Here's what Wikipedia has to say.

[quote]2004 Bankruptcy
On September 22, 2004, Interstate Bakeries filed for Chapter 11 bankruptcy. The company also named a new chief executive, Tony Alvarez. Interstate Bakery's stock, which had been at one time $34/share, fell to $2.05/share as they declared bankruptcy. At the time it was the longest bankruptcy in U.S. history. During bankruptcy, Interstate fought a 2007 bid from Mexican baked goods giant Grupo Bimbo and Ron Burkle of the Yucaipa Companies. [11]

With the leadership of Craig Jung, the company emerged from bankruptcy as a private company on February 3, 2009.[12] The plan included a 50 percent equity stake by Ripplewood Holdings and lines/loans by General Electric Capital and GE Capital Markets, Silver Point Finance and Monarch Master Funding. Interstate's union workers made contract concessions in exchange for equity.[13]

During the 2004-2009 bankruptcy period, Interstate closed nine of its 54 bakeries and more than 300 outlet stores. Interstate's work force declined from 32,000 to 22,000 employees. The company also dropped some regional brands and operating agreements, such as the agreement to produce Sunbeam Bread for the northeastern U.S. (now produced by LePage Bakeries of Auburn, Maine)..]/quote]

So it looks like we have a LONG running bankruptcy in which the main owner prior to bankruptcy FOUGHT efforts to have the company sold to other bidders. "We got this" they're saying. They come out of bankruptcy with a slimmed down operation, with unions and debtholders making concessions and getting equity in return.

Now, LESS THAN THREE YEARS after coming out of a 5 year bankruptcy, they're once again forced to file. The equity ownership that the unions got for prior concessions -- yeah, those are gone now.

So what happened? Who knows, other than the obvious fact that their debt-load was too high. It's definitely possible that they overleveraged the company -- that happens all the time -- and the unions weren't interested in another round of cuts. They'd rather see the business die than take it on the chin again.

Maybe it was the union. Maybe it's 100% on them. But without knowing alot more, including how their packages compared to non-union employees, etc., it's certainly hard to say for sure. All we know is they were the final nail in a coffin that was being built for the last 8 years, sicne the company seemingly never really recovered from teh 2004 bankrutpcy.

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"I love signature blocks on the Internet. I get to put whatever the hell I want in quotes, pick a pretend author, and bang, it's like he really said it." George Washington

Just for the sake of it, let me give you a very brief alternative scenario where the unions are basically right to do what they did. I have no idea if this is true or not, of course, but it's worth putting out there how complicated this stuff is.

To get the company out of bankruptcy, the former owners decide they're going to put in a significant amount of new money, but they want to structure it nearly all as debt, at a very high rate of interest -- 15%. On top of that they have senior secured debt form an institutional lender. The lender sees that the company is thinly capitalized so it requires quite alot of covenant protection and a higher-than-market rate of about 8% (which floats based on financial performance). This entire structure is very risky, because if the assumptions don't work, the company is pretty much bound to fail. If the new money had come in entirely (or even mostly) as equity, then the debt load would be much lower, interest rates would be much lower and the senior lender may have given more generous loan terms.

In connection with the exit, the union was required to give up rights that it had and convert some of that to equity. It wanted to have a portion of that as debt, pari passu with the senior secured, but they said (not unreasonably) "no new money from you so no debt status for you". The union accepted the deal, along with reduced benefits etc. going forward.

The new money put in by the owners is better protected because they are lenders, not equity holders, but they also helped caused the problem in the first place because there was ZERO margin for error.

Things don't work out, and the company goes back into bankruptcy. That's partly because (in my entirely hypothetical situation), they decided to expand product lines with insufficient market research, and try to penetrate new markets that were already saturated/dominated by competitors. A complete waste of effort and money.

And now the union is once again asked to make concessions so that the company can continue and the senior secured lenders (who otherwise will make a partial recovery at best) can be far more likely to make a full recovery. Union says no, we've taken it on the chin enough times. They've seen this play before, and have no confidence that this ownership group will be able to make the company viable.

All that is balanced against, of course, the workers losing their jobs. I have no idea what their other opportunities may be, so who knows if they were morons to do that or not. But the point is that the company was almost bound to fail under this ownership/leadership and they were no longer willing to keep taking reduced wages and reduced benefits to keep the company afloat.

__________________
"I love signature blocks on the Internet. I get to put whatever the hell I want in quotes, pick a pretend author, and bang, it's like he really said it." George Washington

Just for the sake of it, let me give you a very brief alternative scenario where the unions are basically right to do what they did. I have no idea if this is true or not, of course, but it's worth putting out there how complicated this stuff is.

To get the company out of bankruptcy, the former owners decide they're going to put in a significant amount of new money, but they want to structure it nearly all as debt, at a very high rate of interest -- 15%. On top of that they have senior secured debt form an institutional lender. The lender sees that the company is thinly capitalized so it requires quite alot of covenant protection and a higher-than-market rate of about 8% (which floats based on financial performance). This entire structure is very risky, because if the assumptions don't work, the company is pretty much bound to fail. If the new money had come in entirely (or even mostly) as equity, then the debt load would be much lower, interest rates would be much lower and the senior lender may have given more generous loan terms.

In connection with the exit, the union was required to give up rights that it had and convert some of that to equity. It wanted to have a portion of that as debt, pari passu with the senior secured, but they said (not unreasonably) "no new money from you so no debt status for you". The union accepted the deal, along with reduced benefits etc. going forward.

The new money put in by the owners is better protected because they are lenders, not equity holders, but they also helped caused the problem in the first place because there was ZERO margin for error.

Things don't work out, and the company goes back into bankruptcy. That's partly because (in my entirely hypothetical situation), they decided to expand product lines with insufficient market research, and try to penetrate new markets that were already saturated/dominated by competitors. A complete waste of effort and money.

And now the union is once again asked to make concessions so that the company can continue and the senior secured lenders (who otherwise will make a partial recovery at best) can be far more likely to make a full recovery. Union says no, we've taken it on the chin enough times. They've seen this play before, and have no confidence that this ownership group will be able to make the company viable.

All that is balanced against, of course, the workers losing their jobs. I have no idea what their other opportunities may be, so who knows if they were morons to do that or not. But the point is that the company was almost bound to fail under this ownership/leadership and they were no longer willing to keep taking reduced wages and reduced benefits to keep the company afloat.

If they didn't believe the company could be viable, the union should have dissolved and advise their patrons to look elsewhere for jobs.

At it's core, the union is not responsible for making company decisions, the company is. It STILL forced the shutdown of a plant, and put it's members out of work. I fail to see how that is the right thing to do. If the company sucks, disassociate with it.

I think in general that's true (that unions have outlived their usefulness).

The problem with unions isn't that they exist. Some degree of labor solidarity is necessary and always will be. The problem is that unions have become big business, and businesses look out for themselves, not their employees.

What is this silly "it's all the Unions' fault" business about? Sure, they're probably partly to blame, but you guys just leap right to that when, frankly, neither you nor I have 1/1000th of the knowledge to truly understand what happened here. "The unions shut it down" is pretty simplistic thinking. What management did or didn't do in the past to make the company competitive, what the debt load is, what the equity owners were and weren't willing to do -- none of that matters in your simplistic view. It's just crazy.

So, for the sake of it, I decided to spent 10 seconds looking up its history, at least since the 2004 bankruptcy. Here's what Wikipedia has to say.

2004 Bankruptcy
On September 22, 2004, Interstate Bakeries filed for Chapter 11 bankruptcy. The company also named a new chief executive, Tony Alvarez. Interstate Bakery's stock, which had been at one time $34/share, fell to $2.05/share as they declared bankruptcy. At the time it was the longest bankruptcy in U.S. history. During bankruptcy, Interstate fought a 2007 bid from Mexican baked goods giant Grupo Bimbo and Ron Burkle of the Yucaipa Companies. [11]

With the leadership of Craig Jung, the company emerged from bankruptcy as a private company on February 3, 2009.[12] The plan included a 50 percent equity stake by Ripplewood Holdings and lines/loans by General Electric Capital and GE Capital Markets, Silver Point Finance and Monarch Master Funding. Interstate's union workers made contract concessions in exchange for equity.[13]

During the 2004-2009 bankruptcy period, Interstate closed nine of its 54 bakeries and more than 300 outlet stores. Interstate's work force declined from 32,000 to 22,000 employees. The company also dropped some regional brands and operating agreements, such as the agreement to produce Sunbeam Bread for the northeastern U.S. (now produced by LePage Bakeries of Auburn, Maine)..]/quote]

So it looks like we have a LONG running bankruptcy in which the main owner prior to bankruptcy FOUGHT efforts to have the company sold to other bidders. "We got this" they're saying. They come out of bankruptcy with a slimmed down operation, with unions and debtholders making concessions and getting equity in return.

Now, LESS THAN THREE YEARS after coming out of a 5 year bankruptcy, they're once again forced to file. The equity ownership that the unions got for prior concessions -- yeah, those are gone now.

So what happened? Who knows, other than the obvious fact that their debt-load was too high. It's definitely possible that they overleveraged the company -- that happens all the time -- and the unions weren't interested in another round of cuts. They'd rather see the business die than take it on the chin again.

Maybe it was the union. Maybe it's 100% on them. But without knowing alot more, including how their packages compared to non-union employees, etc., it's certainly hard to say for sure. All we know is they were the final nail in a coffin that was being built for the last 8 years, sicne the company seemingly never really recovered from teh 2004 bankrutpcy.

Yep. I posted this in the Lounge thread but here is a good read for anybody. Lots of people to blame not just unions.

If they didn't believe the company could be viable, the union should have dissolved and advise their patrons to look elsewhere for jobs.

Que? Unions don't exist to just dissolve. They dont' exist to kill companies, either, of course, but they certianly aren't required to roll over anytime management asks.

Quote:

At it's core, the union is not responsible for making company decisions, the company is. It STILL forced the shutdown of a plant, and put it's members out of work. I fail to see how that is the right thing to do. If the company sucks, disassociate with it.

So, hypothetically, if management said we want you to take minimum wage jobs with no benefits, the union shouldn't recommend its employees vote against that plan because, you know, the company is responsible for making its own decisions and if that's what the company wants....?

Yeah, no. Makes no sense.

The union basically told management that there would be permanent disassociation by all involved rather than accept the latest offer. Management "accepted" that "offer." So that's what happened.

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"I love signature blocks on the Internet. I get to put whatever the hell I want in quotes, pick a pretend author, and bang, it's like he really said it." George Washington

Wow, the unions didn't want to accept another round of massive concessions, I CAN'T understand why!!!!

Quote:

The board replaced Driscoll with Greg Rayburn, a restructuring expert Hostess had hired as a consultant only nine days earlier. Rayburn was a serial turnaround specialist who had worked with such high-profile distressed businesses as WorldCom, Muzak Holdings, and New York City Off-Track Betting. He became Hostess's sixth CEO in a decade. Within a month of taking over, Rayburn had to preside over a public-relations fiasco. Some unsecured creditors had informed the court that last summer -- as the company was crumbling -- four top Hostess executives received raises of up to 80%. (Driscoll had also received a pay raise back then.) The Teamsters saw this as more management shenanigans. "Looting" is how Hall described it in TV interviews.

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"I love signature blocks on the Internet. I get to put whatever the hell I want in quotes, pick a pretend author, and bang, it's like he really said it." George Washington

The union basically told management that there would be permanent disassociation by all involved rather than accept the latest offer. Management "accepted" that "offer." So that's what happened.

So they thought the company was lying about how much trouble they were in and that they would never actually close? They Union decided it was better to have everyone lose their jobs on principal? I'm not sure what they thought the company should have done instead...

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We have a million reasons for failure, but not one excuse... Die Donks, DIE!!

A quote:
"Oh well, there's always next year. We'll be better then, you'll see..." - Every Chiefs fan for the last 44...crap...45 years...

Really? In an age where the city of New York makes it illegal to sell a sugar-sweetened drink over 16 ounces? In an age where Obama states he will issue executive orders to implement Cap & Trade after it was rejected by Congress?

Wow, the unions didn't want to accept another round of massive concessions, I CAN'T understand why!!!!

That's what wrong with liberalism in general. They want what they want. It doesn't matter whether or not the money is there to give them what they want. They want what they want, and damn the consequences.

That's what wrong with liberalism in general. They want what they want. It doesn't matter whether or not the money is there to give them what they want. They want what they want, and damn the consequences.

So you would be ok taking an 8% paycut twice and lose pension and benefits while the top execs are giving each other huge raises?